G20 moves to resolve trade imbalances

| November 12, 2010 | 0 Comments

The G20 group of nations have agreed to avoid “competitive devaluation” of currencies in what has been regarded as a tense summit in Seoul, South Korea.

Most notably were the tensions between the US and China. The US has previously expressed dissatisfaction that China is keeping the value of the yuan low to help its exporters at the expense of overseas competitors.

Trade groups have argued that the yuan, also referred to as the renminbi, is kept up to 40% below what its value should be against the US dollar.

Britain has also argued that the massive foreign currency reserves China has built up threaten the global economy.

US President, Barack Obama, told a news conference after the communique was agreed that “we will closely watch the appreciation of China’s currency.”

President Obama added that there is “broad agreement” on global economic policy between the G20 group of major economies.

However, the agreement to develop new guidelines to avert the threat of a currency war did not fall within the fixed caps on national trade deficits and surpluses as proposed by the US.

This was rejected by China and Germany which argued that the measures would hit competitiveness.

Finally, the communique included a range of pledges, most notably measures to “implement a range of structural reforms” to boost economic growth.

Tags: , currency war, , , , , , trade imbalances,

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